Let's say we got two armies. Each of them has the same number of soldiers, all equipped with the same weapons (bolt action rifles), fighting over a symmetric but complex battlefield. All of them have the same skills, the same strengths, the same effective labor. The only difference is that one army formed a command structure before the battle, so that the army could coordinate itself and respond to information. The other army does not, and the soldiers simply march into battle, making no effort to coordinate beyond those immediately near them.

Who do you think would win and why?

Quote from: Psy

Engineers are workers, they are paid a wage for their work and only paid a fraction of the value their produced. They are involved in the production process as they design the means of production, process of production and commodities. Capitalists don't perform this task, very few capitalists had engineering degrees and engineering is not a prerequisite for business courses.

They accomplish the same effects, but with managing skills rather than engineering. They convert potential skill into actual skill, by doing so they increase the effectiveness of labor, and thus they generate value.

Quote from: Psy

Foremen usually direct production not CEOs and investors rarely even are aware of the production process.

But they direct the Foremen. They coordinate the coordinators. They deal with the bigger picture.

Quote from: Psy

But the talent agent doesn't create talent, if a studio discovered the talent directly the studio would still get the same amount talent then if it was brought to them through a talent agent.

And how did the studio discover the talent? Did they sort through countless people who claim to have talent, or don't claim to have talent at all, only to spot and identify the one who did have talent? You treat this as if it is something that the studio can do as an aside, a minor task, not worthy of even noting. However, the spotting of talent from a vast sea of non-talents is not an easy task. Hence there are talent agents.

Quote from: Psy

Firefights on the streets is disruptive to production regardless of the parties involved.

It was true even when there weren't firefights, in fully stable and peaceful regions isolated from the conflict.

Quote from: Psy

Quote from: wodan46

Saving value from being wasted is the same as creating it for the purposes of economic improvement.

It is not creating it as it is not a source of new value.

Irrelevant. Higher value is higher value. It doesn't matter how that value got higher, it counts as improvement. Stop wasting my time with semantic games.

Quote from: Psy

older means of production.

The older means of production necessitated the development of bloat in order to match newer means of production, even though doing so would ultimately be economically unviable. None of this deals with the issue that it would have been the same if workers had been in charge. In fact, a capitalist with large reserves of money is in a far better position to take a loss now by switching over to a newer means of production in order to ensure success later.

Quote from: Psy

Quote from: wodan46

Firing workers decreases supply. This is incredibly obvious.

But firing workers also decreases demand, you need money to buy commodities.

I have no idea what you are talking about. Firing a worker who makes cars decreases car production, hence the car supply is decreases. It does not increase demand for cars, though due to the changing ratio of supply to demand, car prices may eventually start to increase.

Quote from: Psy

There is rampant over-production across all sectors of global capitalism.

How so? Isn't communism even worse, regularly over and under producing.

Quote from: Psy

Why? Elected officials are bought off by private companies, even if you ban it why wouldn't it just go underground?

The choices are have elected officials potentially be bought off by private companies, or have them BE the private companies. In the former, its possible to do something. In the latter, you are just plain screwed.

The main reason elected officials are successfully bought off by private companies is because they need their money in order to stand a chance at getting elected. The solution is to have the government pay for election related bills (and make them pay a LOT), but refuse to pay for any politician who has a hint of private money usage. For bonus irony, pay for this with taxes on private companies.

Quote from: Psy

That is true but when it comes to producing utility (like a bridge) they are able to organize productive forces as good as any private company.

The difference being if civil workers refuse to build a bridge until they get better benefits, they are taking a stand and will have some support, whereas if soldiers refuse to build a bridge until they get better benefits, they get courtmartialed and jailed.

Quote from: Psy

Yet the Marxist revolutions in Germany (yes there was more then one) after WWI were crushed so there wasn't.

I'm talking about the socialist lite systems present now in Europe, which might eventually go more so.

I have no idea what that even is, so it wouldn't be surprising. Given that I also view the vast majority of economic theory to be garbage, I don't really mind.

I am actually pretty close to Psy's perspectives on capitalists, but I still believe them to be an important and necessary cog. However, I think that CEOs and upper management should receive bonuses based on the profits they earn the company, not based on their ability to transfer earnings to themselves and expenses to others.

The issue is not whether capitalists are important and necessary cog in capitalism but if they are the source of new value in capitalism. LTV says that capitalists are not a source of new value, that all the value they saved was produced by workers in the production cycle and centres of production are far more important in determining the production new value then those that manage said centres of production.

The revelation of this is if workers could conger up unlimited utility with little effort said unlimited utility would have next to little market value, this means eventually technology would outgrow capitalism as eventually technology would make productive forces too vast for any commodity to have any significant market value.

The issue is not whether capitalists are important and necessary cog in capitalism but if they are the source of new value in capitalism.

A society with capitalists is capable of generating more value than a society without them, all other things being the same. Whether or not they directly produce that value, or whether or not they spend as many hours of labor for that value as a worker would, is irrelevant.

Let's say we got two armies. Each of them has the same number of soldiers, all equipped with the same weapons (bolt action rifles), fighting over a symmetric but complex battlefield. All of them have the same skills, the same strengths, the same effective labor. The only difference is that one army formed a command structure before the battle, so that the army could coordinate itself and respond to information. The other army does not, and the soldiers simply march into battle, making no effort to coordinate beyond those immediately near them.

Who do you think would win and why?

Marxists like planning and organization they just like that planning and organization to be of those on the ground. The POUM (Trots) of the Spanish Civil War pushed for greater and greater organization on the battlefield.

So ask yourself which army would have a better chance, the army that is centrally organized with no autonomy among the units or the army of peers where troops are expected the make decisions and take responsibility for those decisions yet there is central goal. Think what would happen to troops of the first army if they get cut off from their command or they are faced with a ambush and their command is unaware of what is going on. Think of the increased moral of the troops of the second army were they know when some over their radio barks orders they know those orders are organization from their comrades on the battlefield rather then some brass nowhere near the fighting.

You can kinda see this in multi-player games, trying to have a central leader usually fails and the teams that usually dominate are the teams where they work well together, share command and can work semi-autonomously.

Quote from: wodan46

Quote from: Psy

Engineers are workers, they are paid a wage for their work and only paid a fraction of the value their produced. They are involved in the production process as they design the means of production, process of production and commodities. Capitalists don't perform this task, very few capitalists had engineering degrees and engineering is not a prerequisite for business courses.

They accomplish the same effects, but with managing skills rather than engineering. They convert potential skill into actual skill, by doing so they increase the effectiveness of labor, and thus they generate value.

That assumes workers need to managed to be productive. Free projects like free software suggest otherwise.

Quote from: wodan46

Quote from: Psy

Foremen usually direct production not CEOs and investors rarely even are aware of the production process.

But they direct the Foremen. They coordinate the coordinators. They deal with the bigger picture.

They deal in nothing but maximizing profits, a simple computer program could do that with similar success rates,

Quote from: wodan46

Quote from: Psy

But the talent agent doesn't create talent, if a studio discovered the talent directly the studio would still get the same amount talent then if it was brought to them through a talent agent.

And how did the studio discover the talent? Did they sort through countless people who claim to have talent, or don't claim to have talent at all, only to spot and identify the one who did have talent? You treat this as if it is something that the studio can do as an aside, a minor task, not worthy of even noting. However, the spotting of talent from a vast sea of non-talents is not an easy task. Hence there are talent agents.

Michal Bay is allowed to make films and he has no talent so currently it is pretty much what ever sells rather then talent.

Quote from: wodan46

Quote from: Psy

Firefights on the streets is disruptive to production regardless of the parties involved.

It was true even when there weren't firefights, in fully stable and peaceful regions isolated from the conflict.

There really wasn't any truly isolated regions.

Quote from: wodan46

Quote from: Psy

Quote from: wodan46

Saving value from being wasted is the same as creating it for the purposes of economic improvement.

It is not creating it as it is not a source of new value.

Irrelevant. Higher value is higher value. It doesn't matter how that value got higher, it counts as improvement. Stop wasting my time with semantic games.

Where new value comes from is a important point.

Quote from: wodan46

Quote from: Psy

older means of production.

The older means of production necessitated the development of bloat in order to match newer means of production, even though doing so would ultimately be economically unviable. None of this deals with the issue that it would have been the same if workers had been in charge. In fact, a capitalist with large reserves of money is in a far better position to take a loss now by switching over to a newer means of production in order to ensure success later.

By thing for a minute, labor value equals market value of the commodity so lowering labor value devalues the community which means less value is produced per vehicle. Yes increased demand offsets thus but currently that is highly unlikely.

Quote from: wodan46

Quote from: Psy

Quote from: wodan46

Firing workers decreases supply. This is incredibly obvious.

But firing workers also decreases demand, you need money to buy commodities.

I have no idea what you are talking about. Firing a worker who makes cars decreases car production, hence the car supply is decreases. It does not increase demand for cars, though due to the changing ratio of supply to demand, car prices may eventually start to increase.

It lowers demand for cars since there is less means of consumption in the market.

Quote from: wodan46

Quote from: Psy

There is rampant over-production across all sectors of global capitalism.

How so? Isn't communism even worse, regularly over and under producing.

Just look at production figures, they have been going down since the beginning of the crisis.

Quote from: wodan46

Quote from: Psy

Why? Elected officials are bought off by private companies, even if you ban it why wouldn't it just go underground?

The choices are have elected officials potentially be bought off by private companies, or have them BE the private companies. In the former, its possible to do something. In the latter, you are just plain screwed.

The main reason elected officials are successfully bought off by private companies is because they need their money in order to stand a chance at getting elected. The solution is to have the government pay for election related bills (and make them pay a LOT), but refuse to pay for any politician who has a hint of private money usage. For bonus irony, pay for this with taxes on private companies.

But how do you stop capitalists as a class having more influence of the government?

Quote from: wodan46

Quote from: Psy

That is true but when it comes to producing utility (like a bridge) they are able to organize productive forces as good as any private company.

The difference being if civil workers refuse to build a bridge until they get better benefits, they are taking a stand and will have some support, whereas if soldiers refuse to build a bridge until they get better benefits, they get courtmartialed and jailed.

Again true but we are talking about the ability to organize productive forces to produce utility.

Quote from: wodan46

Quote from: Psy

Yet the Marxist revolutions in Germany (yes there was more then one) after WWI were crushed so there wasn't.

I'm talking about the socialist lite systems present now in Europe, which might eventually go more so.

But think about it, if Germany after WWI went Marxist Russia would have had aid from a major industrial power to modernize and Germany being a major industrial power didn't have the problems Russia had when it came to productive capacity.

The issue is not whether capitalists are important and necessary cog in capitalism but if they are the source of new value in capitalism.

A society with capitalists is capable of generating more value than a society without them, all other things being the same. Whether or not they directly produce that value, or whether or not they spend as many hours of labor for that value as a worker would, is irrelevant.

This crisis suggests otherwise, as capitalists cut back the production of new value.

So ask yourself which army would have a better chance, the army that is centrally organized with no autonomy among the units or the army of peers where troops are expected the make decisions and take responsibility for those decisions yet there is central goal.

The army has command operating at all levels. It would have them at the levels that you do, but it has them at higher levels. If a squad got surrounded and cut off, a commander might be able to rescue it, or prevent it from happening altogether. No such chance if squads operate separately.

Think what would happen to troops of the first army if they get cut off from their command or they are faced with a ambush and their command is unaware of what is going on. Think of the increased moral of the troops of the second army were they know when some over their radio barks orders they know those orders are organization from their comrades on the battlefield rather then some brass nowhere near the fighting.

Their orders are still from those on the battlefield. However, those who can see the bigger picture give orders to those who give orders. The guy on the ground can only see so much from his position. While the higher commanders won't be able to see any position with the same level of detail, they have information on many positions.

You can kinda see this in multi-player games, trying to have a central leader usually fails and the teams that usually dominate are the teams where they work well together, share command and can work semi-autonomously.

That's because players on a team generally have access to the same information, and have armies that they and only they can command. There are only a few games that break from that setup. There are several half life mods wherein most players are first person grunts and one player acts as a third person leader. The leader is generally considered critical.

Quote from: Psy

That assumes workers need to managed to be productive. Free projects like free software suggest otherwise.

Showing that there are some circumstances where workers can be productive without management doesn't mean anything, especially since you would often need management to get workers to be at such areas to begin with, and there are still many cases where management value is quite clear.

Also, you are presuming that what works for small systems works for large systems.

Quote from: Psy

They deal in nothing but maximizing profits, a simple computer program could do that with similar success rates,

You are saying someone is capable of writing a program capable of analyzing the economic currents of the world, analyzing a variety of ventures and approaches to a system, then picking the best system? Why isn't he a billionaire yet?

Quote from: Psy

Michal Bay is allowed to make films and he has no talent so currently it is pretty much what ever sells rather then talent.

You completely ignored my answer in favor of making an ad hominem to a person who isn't even in the debate. A person who managed to make a movie that makes 400 million in 5 days, and will likely make 1.5-2 billion in total. I'd say that's pretty talented. He ignored the critics, he ignored the naysayers, and made a movie that focused entirely on robots beating each other up with lots of explosions, while occasionally humiliating the human characters, with no semblance of plot or coherence. To reduce an action movie to such basic purity was ingenious.

Quote from: Psy

There really wasn't any truly isolated regions.

Wrong

Quote from: Psy

Where new value comes from is a important point.

No it isn't. What's relevant is whether or not the value you have at the end of the day was better than the value at the start of it.

Quote from: Psy

By thing for a minute, labor value equals market value of the commodity so lowering labor value devalues the community which means less value is produced per vehicle. Yes increased demand offsets thus but currently that is highly unlikely.

Irrelevant. Stay on subject.

Quote from: Psy

Quote from: wodan46

I have no idea what you are talking about. Firing a worker who makes cars decreases car production, hence the car supply is decreases. It does not increase demand for cars, though due to the changing ratio of supply to demand, car prices may eventually start to increase.

It lowers demand for cars since there is less means of consumption in the market.

How so? The demand for cars is not dependent on the supply for cars. The only relationship those two factors have is pricing.

Quote from: Psy

Just look at production figures, they have been going down since the beginning of the crisis.

How does that prove anything?

Quote from: Psy

Quote from: wodan46

The main reason elected officials are successfully bought off by private companies is because they need their money in order to stand a chance at getting elected. The solution is to have the government pay for election related bills (and make them pay a LOT), but refuse to pay for any politician who has a hint of private money usage. For bonus irony, pay for this with taxes on private companies.

But how do you stop capitalists as a class having more influence of the government?

Capitalists may influence Politicians, but they are hardly dominant over them. My system would decrease this influence even further.

Quote from: Psy

Again true but we are talking about the ability to organize productive forces to produce utility.

No we are not. You keep changing the subjects of the debate to meet your stilted rhetoric. I was establishing that regardless of the short term economic benefits military based production would have, the differing rules of the military system would inevitably lead to a dictatorial and corrupt system.

Quote from: Psy

But think about it, if Germany after WWI went Marxist Russia would have had aid from a major industrial power to modernize and Germany being a major industrial power didn't have the problems Russia had when it came to productive capacity.

How would Germany help Russia when its own economy collapses? Russia, by being independent of the overall economic system, was shielded from the depression and was actually the only country to really benefit from it, or at least break even.

So ask yourself which army would have a better chance, the army that is centrally organized with no autonomy among the units or the army of peers where troops are expected the make decisions and take responsibility for those decisions yet there is central goal.

The army has command operating at all levels. It would have them at the levels that you do, but it has them at higher levels. If a squad got surrounded and cut off, a commander might be able to rescue it, or prevent it from happening altogether. No such chance if squads operate separately.

Think what would happen to troops of the first army if they get cut off from their command or they are faced with a ambush and their command is unaware of what is going on. Think of the increased moral of the troops of the second army were they know when some over their radio barks orders they know those orders are organization from their comrades on the battlefield rather then some brass nowhere near the fighting.

Their orders are still from those on the battlefield. However, those who can see the bigger picture give orders to those who give orders. The guy on the ground can only see so much from his position. While the higher commanders won't be able to see any position with the same level of detail, they have information on many positions.

The problem is imperfect information at higher levels of command and information bottlenecking to get to those that can make sense of that information. For example artillery really doesn't need the option of leaders off the battlefield, what they need is information of friendly units that have contact the enemy within range of their guns, higher ups might overlook the importance their firepower has at lower levels especially if they are unaware of the situation at that level (for example the wind making firing at target A more effective then target B due to less correcting for wind age thus faster re-aiming).

You can kinda see this in multi-player games, trying to have a central leader usually fails and the teams that usually dominate are the teams where they work well together, share command and can work semi-autonomously.

That's because players on a team generally have access to the same information, and have armies that they and only they can command. There are only a few games that break from that setup. There are several half life mods wherein most players are first person grunts and one player acts as a third person leader. The leader is generally considered critical.

While they access to the same information they are focusing on different parts of that information

Quote from: wodan46

Quote from: Psy

That assumes workers need to managed to be productive. Free projects like free software suggest otherwise.

Showing that there are some circumstances where workers can be productive without management doesn't mean anything, especially since you would often need management to get workers to be at such areas to begin with, and there are still many cases where management value is quite clear.

Also, you are presuming that what works for small systems works for large systems.

But then you also have issues of what mind of management.

Quote from: wodan46

Quote from: Psy

They deal in nothing but maximizing profits, a simple computer program could do that with similar success rates,

You are saying someone is capable of writing a program capable of analyzing the economic currents of the world, analyzing a variety of ventures and approaches to a system, then picking the best system? Why isn't he a billionaire yet?

For two reason, one you have a element of chance and next you have a large element of social order. Meaning to get rich mostly your either already of a high social standing or lucky.

Quote from: wodan46

Quote from: Psy

Michal Bay is allowed to make films and he has no talent so currently it is pretty much what ever sells rather then talent.

You completely ignored my answer in favor of making an ad hominem to a person who isn't even in the debate. A person who managed to make a movie that makes 400 million in 5 days, and will likely make 1.5-2 billion in total. I'd say that's pretty talented. He ignored the critics, he ignored the naysayers, and made a movie that focused entirely on robots beating each other up with lots of explosions, while occasionally humiliating the human characters, with no semblance of plot or coherence. To reduce an action movie to such basic purity was ingenious.

He is more an example of how demand is manufactured, his editing is distracting and disorientating. The pace is sluggish due to focusing on irrelevant plot points (and the whole plot makes no sense). Even the action is bad due to the Michal Bay's lack of any editing technique.

Quote from: wodan46

Quote from: Psy

There really wasn't any truly isolated regions.

Wrong

Unless your talking about Spanish colonies which had the problem of being far from industries in Spain there was no truly isolated regions.

Quote from: wodan46

Quote from: Psy

Where new value comes from is a important point.

No it isn't. What's relevant is whether or not the value you have at the end of the day was better than the value at the start of it.

Since capitalism required perpetual growth new value creation is very important.

Quote from: wodan46

Quote from: Psy

By thing for a minute, labor value equals market value of the commodity so lowering labor value devalues the community which means less value is produced per vehicle. Yes increased demand offsets thus but currently that is highly unlikely.

Irrelevant. Stay on subject.

How so, lowering labor value lower market value of the commodity.

Quote from: wodan46

Quote from: Psy

Quote from: wodan46

I have no idea what you are talking about. Firing a worker who makes cars decreases car production, hence the car supply is decreases. It does not increase demand for cars, though due to the changing ratio of supply to demand, car prices may eventually start to increase.

It lowers demand for cars since there is less means of consumption in the market.

How so? The demand for cars is not dependent on the supply for cars. The only relationship those two factors have is pricing.

But the demand of cars is dependant on the ability for workers to buy cars.

Quote from: wodan46

Quote from: Psy

Just look at production figures, they have been going down since the beginning of the crisis.

How does that prove anything?

It proves there is overproduction because capitalists across all industries are dramatically slashing production.

Quote from: wodan46

Quote from: Psy

Quote from: wodan46

The main reason elected officials are successfully bought off by private companies is because they need their money in order to stand a chance at getting elected. The solution is to have the government pay for election related bills (and make them pay a LOT), but refuse to pay for any politician who has a hint of private money usage. For bonus irony, pay for this with taxes on private companies.

But how do you stop capitalists as a class having more influence of the government?

Capitalists may influence Politicians, but they are hardly dominant over them. My system would decrease this influence even further.

Capitalists are the dominant class.

Quote from: wodan46

Quote from: Psy

Again true but we are talking about the ability to organize productive forces to produce utility.

No we are not. You keep changing the subjects of the debate to meet your stilted rhetoric. I was establishing that regardless of the short term economic benefits military based production would have, the differing rules of the military system would inevitably lead to a dictatorial and corrupt system.

But I'm not arguing for military based production, I'm using military production to show capitalist mode of production is not the only effective way of organizing productive forces.

Quote from: wodan46

Quote from: Psy

But think about it, if Germany after WWI went Marxist Russia would have had aid from a major industrial power to modernize and Germany being a major industrial power didn't have the problems Russia had when it came to productive capacity.

How would Germany help Russia when its own economy collapses? Russia, by being independent of the overall economic system, was shielded from the depression and was actually the only country to really benefit from it, or at least break even.

Mostly due to reparations, noticed that once Germany stopped paying reparations its economy quickly recovered.

You think that post LTV theories (like the subjective theory of value) are commonsensical axioms even though they have all failed in controlled experiments while LTV has been proved possible in controlled experiments.

Quote from: Psy

Then you have the fact that LTV satisfies Occam's razor, the other value theories are overly complex, so complex scientists are not sure humans are even are mentally capable of valuing on the margins, since it would take 2^1000 calculations for a animal to value on the margins between only 1,000 goods, the average brain would take 10^200 seconds to process the value of 1,000 goods if marginal theory was true.

The experiments that Psy mentions were not aimed at proving or disproving the "subjective theory of value". Rather they were aimed at a particular strand of that theory, the so called "indifference curve" analysis of utility.

These two ideas are quite distinct. The simple form of the subjective theory is that an individual has priorities. That individual can prioritize the things they desire for consumption. For example, a persons priorities may be, generally put:

1. Have food and drink.2. Have access to a flat or house to live in.3. Have access to a car.4....

That person will use the resources they have in that priority. Naturally priorities change with time. And naturally people make mistakes and mismanage their priorities.

The subject of the experiment was different. The theory in question there was the ability of a person to optimize an overall figure, a "number of utils" of utility. This theory is equivalent to saying three things:

* 1) Goods exist in a continuous spectrum of usefulness.* 2) People do not make mistakes in managing their marginal priorities.* 3) Doing the mental calculation to avoid #2 is always worthwhile.

This theory was known to be dubious long before the experiment. I don't believe it because I don't think the premises above are reasonable.

However, this doesn't affect any important theory of economics.

On the roll of owners...

Quote from: wodan46

Hence, those with access to value stored in the form of currency must make decisions as to how to distribute it in order to result in the generation rather than the loss of value. This is the goal that CEOs are SUPPOSED to have, when it comes to managing their companies resources. The problem is that it is too easy for CEOs to siphon stored value to themselves while concealing their actions, resulting in them draining the system.

Not CEOs. As Psy has mentioned previously CEOs are not owners, they are managers. It is the owners, those who own shares, who have the ulitimate job of allocating resources. They do so by deciding what to invest in.

When CEOs rip-off the businesses that they manage that is not a problem for society unless a crime has occurred, it is a problem for shareholders who are the businesses owners. The law supports CEOs and boards by deliberately making things difficult for shareholders, and it has done for nearly a century.

Wodan, you are otherwise exactly right in identifying the roll of those in higher levels. Regarding the roll of owners I'll quote Ludvig Von Mises from his article "Profit and Loss":

Quote from: Mises

If all people were to anticipate correctly the future state of the market, the entrepreneurs would neither earn any profits nor suffer any losses. They would have to buy the complementary factors of production at prices which would, already at the instant of the purchase, fully reflect the future prices of the products. No room would be left either for profit or for loss. What makes profit emerge is the fact that the entrepreneur who judges the future prices of the products more correctly than other people do buys some or all of the factors of production at prices which, seen from the point of view of the future state of the market, are too low. Thus the total costs of production — including interest on the capital invested — lag behind the prices which the entrepreneur receives for the product. This difference is entrepreneurial profit.

On the other hand, the entrepreneur who misjudges the future prices of the products allows for the factors of production prices which, seen from the point of view of the future state of the market, are too high. His total costs of production exceed the prices at which he can sell the product. This difference is entrepreneurial loss.

Thus profit and loss are generated by success or failure in adjusting the course of production activities to the most urgent demand of the consumers. Once this adjustment is achieved, they disappear. The prices of the complementary factors of production reach a height at which total costs of production coincide with the price of the product. Profit and loss are ever-present features only on account of the fact that ceaseless change in the economic data makes again and again new discrepancies, and consequently the need for new adjustments originate.

2. The Distinction Between Profits and Other Proceeds

Many errors concerning the nature of profit and loss were caused by the practice of applying the term profit to the totality of the residual proceeds of an entrepreneur.

Interest on the capital employed is not a component part of profit. The dividends of a corporation are not profit. They are interest on the capital invested plus profit or minus loss.

The market equivalent of work performed by the entrepreneur in the conduct of the enterprise's affairs is entrepreneurial quasi-wages but not profit.

On LTV...

Reverend Sydney Smith joined the political economy club in the 19th century, in the heyday of the Labour Theory of Value. He joined to find out what "value" is, he left because nobody there could tell him. He went on to write a rhyming recipe for salad dressing.

Psy's claim is that all administrative activities do not contribute to "value". As Wodan correctly notes this is entirely circular and make no sense.

Consider farmers for example. Farmers do not grow crops, crops grow of their own accord. Farmers do the work of making that happen. So, under what branch of LTV logic do farmers "create value". The only argument can be that organizing humans is different to organizing plants or animals. One "creates value" but the other does not.

You think that post LTV theories (like the subjective theory of value) are commonsensical axioms even though they have all failed in controlled experiments while LTV has been proved possible in controlled experiments.

Quote from: Psy

Then you have the fact that LTV satisfies Occam's razor, the other value theories are overly complex, so complex scientists are not sure humans are even are mentally capable of valuing on the margins, since it would take 2^1000 calculations for a animal to value on the margins between only 1,000 goods, the average brain would take 10^200 seconds to process the value of 1,000 goods if marginal theory was true.

The experiments that Psy mentions were not aimed at proving or disproving the "subjective theory of value". Rather they were aimed at a particular strand of that theory, the so called "indifference curve" analysis of utility.

These two ideas are quite distinct. The simple form of the subjective theory is that an individual has priorities. That individual can prioritize the things they desire for consumption. For example, a persons priorities may be, generally put:

1. Have food and drink.2. Have access to a flat or house to live in.3. Have access to a car.4....

That person will use the resources they have in that priority. Naturally priorities change with time. And naturally people make mistakes and mismanage their priorities.

The subject of the experiment was different. The theory in question there was the ability of a person to optimize an overall figure, a "number of utils" of utility. This theory is equivalent to saying three things:

* 1) Goods exist in a continuous spectrum of usefulness.* 2) People do not make mistakes in managing their marginal priorities.* 3) Doing the mental calculation to avoid #2 is always worthwhile.

This theory was known to be dubious long before the experiment. I don't believe it because I don't think the premises above are reasonable.

However, this doesn't affect any important theory of economics.

Then you run into how does one attempt to maximize utility, like I said in games like Dungeons and Dragons it is not really that hard for people to maximize utility of fictional goods through LTV. Want to know the best gear for your player's class per level then basically it is LTV to rescue allowing gamers to compare effort to utility.

Quote from: Current

On the roll of owners...

Quote from: wodan46

Hence, those with access to value stored in the form of currency must make decisions as to how to distribute it in order to result in the generation rather than the loss of value. This is the goal that CEOs are SUPPOSED to have, when it comes to managing their companies resources. The problem is that it is too easy for CEOs to siphon stored value to themselves while concealing their actions, resulting in them draining the system.

Not CEOs. As Psy has mentioned previously CEOs are not owners, they are managers. It is the owners, those who own shares, who have the ulitimate job of allocating resources. They do so by deciding what to invest in.

When CEOs rip-off the businesses that they manage that is not a problem for society unless a crime has occurred, it is a problem for shareholders who are the businesses owners. The law supports CEOs and boards by deliberately making things difficult for shareholders, and it has done for nearly a century.

It a problem for society as it is misallocation of surplus value even from a capitalist perspective, this why capitalists Russia cracked down on corrupt capitalists, the bourgeois state had to step in to protect capitalism as a system from the corruption of capitalists.

Quote from: wodan46

On LTV...

Reverend Sydney Smith joined the political economy club in the 19th century, in the heyday of the Labour Theory of Value. He joined to find out what "value" is, he left because nobody there could tell him. He went on to write a rhyming recipe for salad dressing.

Psy's claim is that all administrative activities do not contribute to "value". As Wodan correctly notes this is entirely circular and make no sense.

Consider farmers for example. Farmers do not grow crops, crops grow of their own accord. Farmers do the work of making that happen. So, under what branch of LTV logic do farmers "create value". The only argument can be that organizing humans is different to organizing plants or animals. One "creates value" but the other does not.

Psy, remember, no circular arguments.

Farmers exert energy adding utility to the crops, if the farmer goes on strike the utility if lost. Yet if capitalists went on strike no utility would be lost since capitalists generate no utility that anyone would pay for.

I don't think that I'll convince Psy. However, in the 19th century when the original debate about the labour theory of value took place the main proponent of the theory was John Stuart Mill. Mill himself was never convinced, however most other economists of the day were. I only have Psy to argue against not J.S. Mill, so I think it's an easier job these days.

I don't think that I'll convince Psy. However, in the 19th century when the original debate about the labour theory of value took place the main proponent of the theory was John Stuart Mill. Mill himself was never convinced, however most other economists of the day were. I only have Psy to argue against not J.S. Mill, so I think it's an easier job these days.

I think it is harder since the rest of the scientific community has mostly written off modern economic theory as pseudoscience and view LTV far more seriously. Even Technocrats with their energy accounting system is basically a variation of LTV but focusing on the energy workers need to labor. If you ask any group of scientists and engineers talking about how to engineer a new society a tiny few would criticize the idea of using some form of LTV to gauge value in this future society. From their point of view if you want to know for example the value of a space station to a future society the best to start probably would be looking the effort that would required to maintain the community on the space station over the utility that space station would provide humanity.

My point is that marginal value theory doesn't require that utility be exactly maximized. Indeed whether or not it can be "maximized" is open to debate.

What you are criticizing here are the forms of utility theory that require such maximization, such as the Arrow-Debreu-Hahn theory. However, no important economic theories depend on such utility theories.

like I said in games like Dungeons and Dragons it is not really that hard for people to maximize utility of fictional goods through LTV. Want to know the best gear for your player's class per level then basically it is LTV to rescue allowing gamers to compare effort to utility.

A person may *estimate* a comparison between effort and utility by looking at the amount of labour expended. The critical point though is that utility doesn't depend on that amount.

Computer games and other sorts of games don't demonstrate any of the salient points. Economics is not a game. In computer games there is a strong relationship between the utility of a unit of some sort and the cost of it to the player. However that relationship is programmed into the game. There are no such similar relationships programmed into reality. The relationship we observe between the price of commodities and the amount of labour they require is not an automatic one. It comes into being because of the complex interplay of supply, demand and marginal decisions.

It a problem for society as it is misallocation of surplus value even from a capitalist perspective, this why capitalists Russia cracked down on corrupt capitalists, the bourgeois state had to step in to protect capitalism as a system from the corruption of capitalists.

No it is not. Owners in a free-market are quite capable of preventing it by reallocating their capital to more honest businesses and putting in place more checks and balances. I agree that governments have stepped in in the past, this is simply a subsidy, it is not necessary.

Farmers exert energy adding utility to the crops, if the farmer goes on strike the utility if lost. Yet if capitalists went on strike no utility would be lost since capitalists generate no utility that anyone would pay for.

It was not my point in this part of the discussion to talk about capitalists. I was talking about administration.

You claim that "value" is only added by those who work on the production process. Above you wrote:

Quote from: Psy

Because value comes from the application of labor to the creation of utility/commodities, managing the process is not creating value,

Now, as you have said before, in Marxist theories the labour value "inhered" in a product is proportional to the exchange value of that product, the price. A capitalist adds his "surplus" on top of that labour value.

You claim that administrative tasks managing the process do not add value but that tasks within the process do. According to Marxist theory that implies that administrative tasks don't have an impact on exchange value, i.e. price.

But, how can that be. In any sort of society administration of production processes is necessary, even in a Marxist one. In a capitalist society the cost of administration must be born by the business. If it cannot make enough profit to pay for administration then it will go bankrupt. The cost of administration must be charged in the cost of products. Competition comes into play in administration too. If a business can achieve lower administration costs while keeping other factors similar then it can make higher profits, or charge lower prices and expand it's market share. So, how can you say that only the process of production affects price?

In my view managers organize workers, this is a valuable task. Workers apply labour to the production of goods and services. This is also a valuable task. Now, back to the farmer I mentioned earlier. Workers organize nature to perform their tasks. Some tasks, such as lifting a box they do directly. Others they do indirectly through machines or parts of the natural world.

A farmer uses seeds and the earth. He doesn't grow the plants, they grow of their own accord. I could therefore write-off the work of the farmer as irrelevant by your own logic. I could explain this doctorine by paraphrasing your words:

"Value comes from the application of nature to the creation of commodities, managing the process is not creating value"

The belief that the source of all value is land is wrong, but just as wrong as believing the source to be labour.

It's worth going a little further on this point because it really shows the ridiculousness of Psy's theories. Consider a factory that makes paper. I buy a ream of paper from it. I am both an engineer and a manager. Does this mean that if I use a sheet of that paper in my role as an engineer then it "creates value" and affects the exchange value of products. Whereas if I use a sheet of that paper as a manager the value is simply lost?

My point is that marginal value theory doesn't require that utility be exactly maximized. Indeed whether or not it can be "maximized" is open to debate.

What you are criticizing here are the forms of utility theory that require such maximization, such as the Arrow-Debreu-Hahn theory. However, no important economic theories depend on such utility theories.

But consumers try to maximize utility and to some extent succeed, that must mean consumers have a value system that is simple enough for a human to maximize utility to some extent.

like I said in games like Dungeons and Dragons it is not really that hard for people to maximize utility of fictional goods through LTV. Want to know the best gear for your player's class per level then basically it is LTV to rescue allowing gamers to compare effort to utility.

A person may *estimate* a comparison between effort and utility by looking at the amount of labour expended. The critical point though is that utility doesn't depend on that amount.

Of course not utility and cost are two different variables, value in LTV is labor in over utility, so labor doesn't change utility but exchange value.

Quote from: Current

Computer games and other sorts of games don't demonstrate any of the salient points. Economics is not a game. In computer games there is a strong relationship between the utility of a unit of some sort and the cost of it to the player. However that relationship is programmed into the game. There are no such similar relationships programmed into reality. The relationship we observe between the price of commodities and the amount of labour they require is not an automatic one. It comes into being because of the complex interplay of supply, demand and marginal decisions.

No engineer in the world decides on what material to use based on marginal decisions, they once again use LTV to balance utility with cost. The value of the commodity is known before the consumer buys it as it has been engineered just like the values of fictional goods in games.

It a problem for society as it is misallocation of surplus value even from a capitalist perspective, this why capitalists Russia cracked down on corrupt capitalists, the bourgeois state had to step in to protect capitalism as a system from the corruption of capitalists.

No it is not. Owners in a free-market are quite capable of preventing it by reallocating their capital to more honest businesses and putting in place more checks and balances. I agree that governments have stepped in in the past, this is simply a subsidy, it is not necessary.

You forget about the falling rate of profit and over production/under consumption in the system. The reason so many investors invested in these shady deals is there was no where else to invest. Also it took huge efforts of bourgeois state to bail the capitalists out of the great depression.

Farmers exert energy adding utility to the crops, if the farmer goes on strike the utility if lost. Yet if capitalists went on strike no utility would be lost since capitalists generate no utility that anyone would pay for.

It was not my point in this part of the discussion to talk about capitalists. I was talking about administration.

You claim that "value" is only added by those who work on the production process. Above you wrote:

Quote from: Psy

Because value comes from the application of labor to the creation of utility/commodities, managing the process is not creating value,

Now, as you have said before, in Marxist theories the labour value "inhered" in a product is proportional to the exchange value of that product, the price. A capitalist adds his "surplus" on top of that labour value.

No in LTV the capitalist subtracts surplus value, the difference from what workers produce and what they are paid.

Quote from: Current

You claim that administrative tasks managing the process do not add value but that tasks within the process do. According to Marxist theory that implies that administrative tasks don't have an impact on exchange value, i.e. price.

But, how can that be. In any sort of society administration of production processes is necessary, even in a Marxist one. In a capitalist society the cost of administration must be born by the business. If it cannot make enough profit to pay for administration then it will go bankrupt. The cost of administration must be charged in the cost of products. Competition comes into play in administration too. If a business can achieve lower administration costs while keeping other factors similar then it can make higher profits, or charge lower prices and expand it's market share. So, how can you say that only the process of production affects price?

Because it is not utility the consumer cares about, for example a person buying a TV doesn't care about the administration of the factory to produced it. It is also not utility that is very labor intensive, it really doesn't take much effort to maintain organization of production once workers understand the process.

Quote from: Current

In my view managers organize workers, this is a valuable task. Workers apply labour to the production of goods and services. This is also a valuable task. Now, back to the farmer I mentioned earlier. Workers organize nature to perform their tasks. Some tasks, such as lifting a box they do directly. Others they do indirectly through machines or parts of the natural world.

A farmer uses seeds and the earth. He doesn't grow the plants, they grow of their own accord. I could therefore write-off the work of the farmer as irrelevant by your own logic. I could explain this doctorine by paraphrasing your words:

"Value comes from the application of nature to the creation of commodities, managing the process is not creating value"

The belief that the source of all value is land is wrong, but just as wrong as believing the source to be labour.

I don't see managers on the floor exerting energy, the farmer does so the farmers is doing much more then organizing nature.

Quote from: Current

It's worth going a little further on this point because it really shows the ridiculousness of Psy's theories. Consider a factory that makes paper. I buy a ream of paper from it. I am both an engineer and a manager. Does this mean that if I use a sheet of that paper in my role as an engineer then it "creates value" and affects the exchange value of products. Whereas if I use a sheet of that paper as a manager the value is simply lost?

The paper doesn't create new value it doesn't exert energy, the act of a engineer using the paper create value to what the engineer is designing, while a manager using the paper just to manage production is simply overhead.

But consumers try to maximize utility and to some extent succeed, that must mean consumers have a value system that is simple enough for a human to maximize utility to some extent.

Indeed. However prioritizing spending is not difficult to understand. I expect you do it yourself.

Also, it is not a criticism of marginalism to say that people use cost in their decisions. Bohm-Bawerk wrote:

Quote from: Bohm-Bawerk

In practice, we stop innumerable times with a valuation based on costs. If one asks me how highly I value a winter coat, that I can buy at any moment at a cost of 40 florins, I will answer without hesitation and without further speculation: at 40 florins. If it were to cost only 35 florins, so I would decide just as quickly, and just as decisively answer: at 35 florins. From this indisputable fact, Dietzel has apparently gotten the impression that the explanation of the marginal-value theorists, which even in these cases comes back to some marginal utility, is not natural or true to nature, but makes “terrible” detours by means of a truly superfluous “jeu d’esprit spirituel” [“game of intellectual solitaire”]. What justification does this impression have? It has no justification. It stems from a confusion between that which individuals do or have to do, if they want to estimate the value of a good in practice, and that which science has to do if it wants to explain the practical valuations themselves.

However costs do not tell a person how useful a good is to them. A person buys a house near to where they work. They do so clearly because that is more useful than a house very far away.

For example consider a set of cakes for sale in a shop. I wish to buy a good cake. I could look at the cost of each of the cakes and estimate that the quality is proportional to the cost. "You get what you pay for" as they say. I may then consider how much I would like a cake compared to money in my pocket and therefore decide on how much I want to spend.

It must be recognized though that if I do this I am relying on marginal decisions made by others. If the expensive cakes are indeed better than the cheaper cakes then it is because other customers have acted differently to myself. They have compared the quality and price of the cakes and bought on that basis rather than estimating. If this competition did not occur then the makers of poor cakes could charge the same price for them as the makes of good cakes charge regardless of labour expended in either case.

Quote from: Psy

No engineer in the world decides on what material to use based on marginal decisions, they once again use LTV to balance utility with cost.

I am an engineer, I work for a very large company that you have probably heard of. I certainly do use marginal decisions.

Quote from: Psy

The value of the commodity is known before the consumer buys it as it has been engineered just like the values of fictional goods in games.

No it isn't. When myself and my colleague make a new product our employer has a target price. However the business cannot force customers to buy at that price. If customers don't pay it we must reduce it or cancel the product. If customers buy large quantities we may increase the price.

Quote from: Psy

Quote from: Current

Now, as you have said before, in Marxist theories the labour value "inhered" in a product is proportional to the exchange value of that product, the price. A capitalist adds his "surplus" on top of that labour value.

No in LTV the capitalist subtracts surplus value, the difference from what workers produce and what they are paid.

That is what I mean. I was describing your position here.

Quote from: Psy

Quote from: Current

You claim that administrative tasks managing the process do not add value but that tasks within the process do. According to Marxist theory that implies that administrative tasks don't have an impact on exchange value, i.e. price.

But, how can that be. In any sort of society administration of production processes is necessary, even in a Marxist one. In a capitalist society the cost of administration must be born by the business. If it cannot make enough profit to pay for administration then it will go bankrupt. The cost of administration must be charged in the cost of products. Competition comes into play in administration too. If a business can achieve lower administration costs while keeping other factors similar then it can make higher profits, or charge lower prices and expand it's market share. So, how can you say that only the process of production affects price?

Because it is not utility the consumer cares about

That has to be the stupidest thing I've ever heard anyone say about economics. Of course the customer cares about utility. He buys a good because it is useful.

Quote from: Psy

for example a person buying a TV doesn't care about the administration of the factory to produced it.

Of course not. That doesn't mean that the administration of the factory doesn't play a part in the cost. If the TV manufacturing business cannot charge a high enough price to cover it's administration cost then it will go bankrupt.

Quote from: Psy

It is also not utility that is very labor intensive, it really doesn't take much effort to maintain organization of production once workers understand the process.

I see you know little about this. It takes a massive amount of effort to do this. For large businesses it costs billions and requires thousands of staff. The same is true of cooperative businesses.

Quote from: Psy

I don't see managers on the floor exerting energy, the farmer does so the farmers is doing much more then organizing nature.

Physical effort or mental effort? Perhaps not the former, but certainly the later. If those who only expend mental effort are not really "creating value" then how are engineers creating value? They only exert mental effort most of the time. Weeks go by inbetween times I build prototypes, does this mean I'm not working in the interim?

Quote from: Psy

The paper doesn't create new value it doesn't exert energy,

Certainly not. However, accord to LTV value is "inherred" in it. So, what happens to that inherred value when it is used by an engineer compared to a manager?

Quote from: Psy

the act of a engineer using the paper create value to what the engineer is designing, while a manager using the paper just to manage production is simply overhead.

Overhead must still be paid for. Good management will produce good results and bad management bad results, the same is true of engineering. So, where is the difference?

Also, engineering is often accounted for as "overhead". Accounting differentiations such as what "overhead" is don't necessarily reflect economic differences.